Managing the Software Digital Supply Chain to power strategic decision making

Effective digital transformation depends on end users having access to the right software and cloud services. And driving the maximum value from these investments by reducing related costs and risks is critically important for any business today.

Building an effective and efficient Digital Supply Chain (DSC) is a way to ensure that end users get what they need when they need it, and that the business gets the optimal value from its software and cloud investments.

DSC automates every stage of software and cloud service procurement but also integrates seamlessly with other management systems. By automating the end-to-end process including software requests, license checks, procurement and renewals tasks, DSC can save you a significant amount in costs, reduce management overheads and improve the end user experience.

80:20 – it’s the smaller suppliers that soak up time

As a general rule, most of your software and cloud spending goes to a handful of vendors. You might spend 80% of your budget with just 20% of your software vendors. That might be expensive in total spend, but it is relatively easy to manage and process because you, and the big vendor, are likely to have effective systems in place.

But it is the smaller software solutions, still vital to your business, that soak up management and administration time. So perhaps just 10% of your software budget spending might account for over 90% of your IT transactions and that’s often a big drain on IT and procurement resources in terms of management effort.

This ‘long tail’ of hundreds or even thousands of smaller software publishers is often dealt with at a local level, which decreases transparency because there is no central record of purchasing. Of course, there might be very good reasons for buying local solutions, but it makes it harder to have an overview of the business or to make decisions about future strategy.

Organizations often have different products performing essentially the same function in different parts of the business. Sometimes this issue is overlooked because it makes up a small part of overall software spending. But with the increasing use of Software as a Service (SaaS) and other cloud services being driven by shadow IT, this unmanaged spend is growing rapidly.

The challenges of rapid transformation

If staff or local entities are making their own purchasing decisions, there’s a good chance the business may be overpaying – either directly by not leveraging economies of scale or through overprovisioning of services. According to Flexera, 35% of all software goes unused.

Purchasing software in a reactive and ad hoc manner, with little strategic oversight, can impact the business. The result is likely to be ‘zombie software’ – bought for a single project and now sitting idle – and still being paid for. An equally serious problem comes from unauthorized software, unknown to the IT department, which brings direct security risks as well as audit and compliance issues.

Keeping on top of this is a management headache. Dealing with the largest strategic software publishers requires focus and dedicated resources but the lower transaction volume makes it easier to manage.

The long tail of smaller publishers that account for most software transactions is much harder to process. Many organizations undergoing digital transformation programs are seeing rapid investment in SaaS and an increase in long tail expenditure as a result.

So, while DSC can be used to manage your strategic vendors like Microsoft, Oracle, Salesforce, Amazon Web Services or IBM, its true potential comes from managing the many other suppliers that keep operations running across your business.

How Digital Supply Chain Management can help

Modernizing your Software Digital Supply Chain addresses these issues.

Firstly, a central catalog provides users with something akin to an app marketplace. You can maintain central control of security and cost through a single entry point and subsequent governance, while making life easier for users. Business units get the software and cloud services they need more quickly and with less research, while IT can manage risks and costs.

Secondly, automation through workflows ensures that users perform the right steps to request software, whether it is limited to software in the central catalog or a request for a new solution. Automation can also save the business money by finding ‘spare’, unused licenses.

Because automation and a central catalog make it easier to access evaluated and approved services, you reduce the spread of ‘shadow IT’. This improves the organization’s security and compliance posture and results in a more strategic view of software purchasing. Shadow IT accounts now for between 36% of total IT spending, according to Gartner.

SaaS and other cloud services make data protection and licensing compliance more complex to manage without the right tools in place. You need to manage an ever-increasing number of different licenses and service level agreements with different end points and renewal requirements.

With the speed of innovation accelerating, companies will rely on an ever growing and faster changing roster of software providers. The days of running a business on a handful of software solutions are long gone. Business needs, and with them software needs, are changing at a faster rate than ever before.